Rising reinsurance costs put pressure on global insurers' credit ratings  July 14th 2023

Rising reinsurance costs put pressure on global insurers' credit ratings

Tougher reinsurance market conditions to continue

Global insurers are facing increased scrutiny as their credit ratings come under pressure due to rising reinsurance costs that compel them to reduce coverage and assume more risks, according to new analysis from DBRS Morningstar.

Citing preliminary data from Guy Carpenter, Morningstar reported that global reinsurance prices surged by 27% in January compared to the previous year.

This marks the sixth consecutive year of price increases and the largest annual jump since 2006, following the aftermath of hurricanes Katrina, Rita, and Wilma.

“We expect the tougher reinsurance market conditions to continue in the short to medium term, putting to the test insurers’ risk management capabilities,” the analysis said.

Farmer’s Insurance to drop more than 100,000 policies, including auto, in Florida exit

Farmer’s Insurance will stop writing auto, residential and umbrella policies in Florida, it confirmed this week in a move that’s expected to affect 100,000 policies.

The figure is believed to encompass a “very small amount of auto policies,” with the majority related to home policies, an Insurance Institute spokesman told Repairer Driven News.

“We expect this decision by Farmers will have very minimal impact on Florida’s auto insurance market as most major national and regional insurers continue to offer coverage to Florida drivers,” said Triple-I’s Mark Friedlander.

He said the non-renewal process will likely begin early next year based on a policy’s expiration date and that Farmers plans to provide information about how affected customers can switch their coverage to its subsidiary Bristol West, which will continue operating in the state.

Trevor Chapman, a Farmers spokesperson, said in a statement to RDN that its decision to leave Florida was necessary to “effectively manage risk exposure.”

Lemonade Launches Its First Brand Campaign: "Changing Insurance"

Lemonade has launched its first brand campaign, titled “Changing Insurance,” this week.

According to the company, The campaign aims to highlight the absurdity of traditional insurance practices, including long hold times and complex jargon, while showcasing Lemonade’s commitment to providing a simple and intuitive insurance experience.

Liron Smadja, Head of Brand Marketing at Lemonade, emphasized that the campaign not only entertains but also demonstrates the transformative power of Lemonade’s innovative approach to insurance, with a strong focus on customer-centricity.

Slip-and-fall scams can be sophisticated and extensive

Personal injury attorney George Constantine and orthopedic surgeon Andrew Dowd were convicted by a Manhattan federal jury late last year for knowingly profiting from a massive $31 million trip-and-fall accident scheme.

Constantine reportedly filed nearly 250 fraudulent personal injury lawsuits, and Dowd performed hundreds of unnecessary knee and shoulder surgeries on patients referred to him through co-conspirators. In April of this year, U.S. District Court Judge Sidney H. Stein sentenced Constantine and Dowd to 8 1/2 years in prison.

While similar amateurish (and failed) attempts at insurance fraud might not engender outrage, it is a mistake to downplay the prevalence of staged accidents and fraudulent personal injury lawsuits. Indeed, staged accidents and fraudulent personal injury lawsuits are often the result of large-scale, organized criminal activity affecting many businesses and their insurance companies.

With that said, this column will discuss one of the largest and most costly trip-and-fall insurance frauds of recent years — effectuated by teams of “runners” who were paid cash kickbacks to recruit patients to stage accidents, lawyers who filed fraudulent personal injury lawsuits, and health care providers who performed unnecessary surgeries and other medical procedures funded by litigation funding companies. This fraudulent scheme began just over a decade ago, with hundreds of individuals recruited to serve as alleged “victims” of orchestrated trip-and-fall accidents. Various indictments led to guilty pleas by two individuals and a 2019 conviction in the Southern District of New York of three participants in the fraud, followed by:

• The 2021 indictments of another set of five defendants;
• Various other guilty pleas and convictions;
• A three-week trial of a personal injury lawyer and orthopedic surgeon in late 2022; and, finally,
• The sentencing of key participants earlier this year.

Writers' strike could cost $8 billion – but insurers won't foot bill

The Hollywood writers’ strike could cost the entertainment industry up to $8 billion, according to an insurance expert, and it won’t be insurers that foot the bill.

“Losses from the 2007 to 2008 strike were around $2 billion,” said Ross Garner, managing director-property & casualty at NFP. “With the amount of new streaming services that have popped up since then, which has led to an increase in productions, losses this time around could be around $8 billion, which would put it up there with major natural disasters, hurricanes and things like that.”

One of the downsides of major strikes is that there is very little to nothing that can be done for clients to mitigate the impact from an insurance perspective.

“There is no insurance product for events like this,” Garner said.

Allianz's US unit ordered to pay $6 billion

A New York judge ordered a unit of Allianz SE to pay about $6 billion as punishment for misrepresenting the investment risk posed by a group of hedge funds that collapsed amid market fluctuations caused by the COVID-19 pandemic.

US District Judge Colleen McMahon imposed the sentence Wednesday in Manhattan on Allianz Global Investors US, which had agreed to the payout last year when it pleaded guilty to a single criminal charge of securities fraud as part of a deal with federal prosecutors. It ends an embarrassing chapter for the unit’s corporate parent, the German insurance giant.

“This is a sad and sorry state of affairs,” McMahon said in describing the criminal conduct admitted by AGI. “The amount of money that is being paid over and forfeited is astronomical, certainly in my experience.” 

AGI was automatically disqualified from acting as an investment adviser or principal underwriter for any mutual fund or closed-end fund for 10 years. Allianz agreed last year to transfer most of AGI’s US assets to Voya Financial Inc. AGI planned to dissolve shortly after the sentencing, according to a July 5 letter to the judge by both sides.

In addition to the payments, AGI was sentenced to five years’ probation, which will be discontinued once it no longer exists, McMahon said.

Liberty Mutual Insurance Announces Key Organizational Changes and Executive Leadership Appointments

Liberty Mutual Insurance President and Chief Executive Officer Tim Sweeney today announced key organizational changes and executive leadership appointments aimed at enhancing focus on long-term strategic markets, while better leveraging scale advantages to drive improved profitability and faster innovation.

Enterprise Transformation and Solutions is a newly formed enterprise function that will lead the company’s efforts to drive expense improvement and operational excellence, deliver efficient and effective solutions that unlock scale advantage, and elevate collective data and data science capabilities to drive better, faster differentiating insights and actions. The function will be led by Jim MacPhee, who has been named Chief Operating Officer, Liberty Mutual.